Should we move our money out of a trust as we get close to filling out college financial aid forms?

UPDATED: Oct 12, 2011

Advertiser Disclosure

It’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

UPDATED: Oct 12, 2011Fact Checked

Get Legal Help Today

Compare Quotes From Top Companies and Save

secured lock Secured with SHA-256 Encryption

Should we move our money out of a trust as we get close to filling out college financial aid forms?

We have a revocable living trust (in our child’s social security number) and hold authority over all assets in the trust which at them moment are invested in mutual funds. Our child is getting ready to enter college and we would like to transfer the funds into our joint money market account to: a) make the assets liquid, and b) get them out of our child’s name and SSN. We understand that in the FAFSA form, 20% of a child’s asset may be counted in aid calculations while only 5$ of the parent’s assets are counted. If we move the mutual fund assets into our account will the money be viewed as income by the IRS and will we be taxed on the amount above the $11,000 gift limit?

Asked on October 12, 2011 under Estate Planning, Ohio


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

Most likely the money transferred from the revocable living trust for the benefit of your child into a mutual fund (presumably in your child's name) where you are his or her custodian over the account in your name for tax purposes for income generated from the accout will not be deemed income just because of the transfer in that the moneys are not income per se. Monies generated as income from the account would be a taxable event for income tax purposes.

For further clarity on your desired transfer it is recommended that you consult with a certified public accountant and/or a tax attorney so as to make sure that the intended  transfer does not in fact create a taxable event for either you or your child before the transfer occurs.

Good luck.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

Get Legal Help Today

Find the right lawyer for your legal issue.

secured lock Secured with SHA-256 Encryption